People read the front pages at a news stand in downtown Lisbon, on April 28, 2010. Stocks dropped sharply on April 27 after Standard & Poor's downgraded the debt of Greece and Portugal Photograph: FRANCISCO LEONG/AFP/Getty Images

The future of Portuguese workers will be directly affected by the men and women working on trading floors many hundreds of miles away.

They are bond market traders and investors who buy and sell IOUs issued by governments (sovereign debt), cities and big corporations. They work in Frankfurt, Paris and Milan, but the lion's share of the business happens in London – and they are increasingly powerful.

To describe the bond markets as huge is a hopeless understatement – according to the European Capital Markets Institute there is €5 trillion (£4.34tn) of eurozone government debt outstanding and the bond markets dwarf the stock markets. Last year €985bn of new debt was issued and this year, as governments all over Europe need to raise cash, there will be far more.

Many years ago, the bond markets used to be calm and ordered in comparison to the stock markets. Investors bought bonds and held them to maturity, but the big traders and investors are now dubbed "bond vigilantes".

When the bond market effectively forced former US president Bill Clinton to balance the US budget deficit in the 1990s with a massive sell-off of US Treasury bonds, his adviser James Carville said: "I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody".

Traders are well paid. A junior - a twentysomething who basically keeps the books up to date – commands about £70,000, but would expect to make more than £100,000 after bonus. Pay deals of five times that for those with "experience and a track record" were fairly standard, said one dealer.

The Greek government has pointed the finger at bond market speculators for exacerbating its problems and some bond investors think the decision by rating agency Standard & Poor's to downgrade Spain on Wednesday was a result of the havoc in the bond market caused by the downgrade of Greece and Portugal a day earlier. In past years the bond market has followed the ratings agencies, not the other way around, and Jim Leaviss at M&G investments described the about-turn as a case of "tail wags dog".

Chris Iggo, head of Fixed Income at Axa, said the last week had been extraordinary, but denied big bond traders had scented blood and were making the economic problems of countries like Greece and Portugal worse. "The finger is always pointed at speculators and traders. Fast money does have an impact at times of crisis, but only if the underlying problems are already there".

Gary Jenkins, head of fixed income research at Evolution Securities, said it had been a rollercoaster week, with near-panic setting in on Wednesday: "It's been absolutely amazing, probably as severe as in 2008 with the banks. On Wednesday morning we were close to staring into the abyss of the government bond market. The way spreads were going, you were looking at a situation where many of the European governments just wouldn't be able to borrow.

"Only the rumours about a €120bn bailout package calmed the markets down. Until then it was looking like carnage. It was a staggering day. It was like nothing we have ever seen. It's very interesting, it's stimulating. It's seeing history unfold. It's crazy and fun but at the same time it's really frightening."

Another fixed income trader, at a big investment bank in London, said: "There has been a lot of panic in certain markets – Greece, Italy and Portugal. But it was pretty well contained. If you see something out of Germany that is very negative, we could see things blow up again."